Apple faces increasing regulatory challenges

EU Regulators Target Apple for Violating New Digital Markets Act

Apple's legal issues expanded on Monday as European Union regulators determined that the company breached a newly enacted law aimed at curbing the power of tech giants. The European Commission concluded that Apple's App Store policies infringed the Digital Markets Act (DMA) by unlawfully preventing software developers from directing customers to alternative content access options outside the App Store.

In addition to this finding, the EU regulator announced an investigation into Apple's practice of charging fees for iOS apps available within the EU. This increased international scrutiny coincides with Apple defending itself in the United States against antitrust charges filed by the US Justice Department and 16 state attorneys general. The lawsuit, initiated in March, accuses Apple of employing illegal tactics to maintain a monopoly in the smartphone market. While Apple is contesting these US charges, it has not yet commented on the new EU developments. Despite the regulatory actions, Apple's stock rose by over 1%.

The Digital Markets Act and "Gatekeepers"

The DMA, which took effect in March, targets six major tech companies deemed "gatekeepers" by the EU: Apple, Amazon, Alphabet, ByteDance, Microsoft, and Meta. It establishes stringent competition rules to prevent these dominant entities from obstructing smaller competitors' entry into various markets. Apple is the first tech giant to receive a violation claim from the European Commission under the DMA.

App Store Fee Structure Under Scrutiny

While the DMA permits Apple to charge developers a fee for new customers acquired via the App Store, it prohibits the company from blocking developers from informing users about alternative purchasing methods. The commission asserts that Apple violated these provisions. “Under the DMA, developers distributing their apps via Apple's App Store should be able, free of charge, to inform their customers of alternative cheaper purchasing possibilities, steer them to those offers and allow them to make purchases,” the commission explained in their announcement.

Punitive Measures and Ongoing Investigations

Violations of the DMA could result in severe penalties, including fines up to 10% of a company's global annual revenue. For Apple, with global revenues reaching $383 billion in 2023, this could translate into significant financial repercussions. Although Apple doesn't separate its App Store revenue in financial disclosures, its broader services category, encompassing App Store revenue, totaled $85 billion in the same year. These developments significantly amplify the financial risks Apple faces from global antitrust regulators.

The Commission has launched another investigation to ascertain whether Apple's fee structure, which charges developers €0.50 for app downloads surpassing one million, contravenes the DMA. Earlier this year, the Commission also fined Apple in a separate antitrust case initiated by Spotify. This case challenged Apple's policy that barred streaming music apps from directing users to pay for content outside the App Store, a decision Apple is currently appealing.